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The US embassy in London has released a statement correcting President Donald Trump on the price tag of its relocation after he claimed it was a "bad deal".

The clarification comes after Trump said he had cancelled his trip to London next month to officially open the new US embassy in protest over its new location south of the River Thames, and the sale of the old building, in the upmarket Mayfair district.

"Reason I canceled my trip to London is that I am not a big fan of the Obama Administration having sold perhaps the best located and finest embassy in London for 'peanuts,' only to build a new one in an off location for 1.2 billion dollars. Bad deal. Wanted me to cut ribbon-NO!" Trump tweeted.

"The project has been executed within the established budget", an embassy spokesman said, adding it had "considered more than 50 sites" in London ahead of the move, which cost up to $1billion and "used no tax dollars".

"A multi-disciplinary team of professionals considered over 170 criteria, to include physical security requirements, and determined that the Nine Elms site was the best overall location for the US government," the statement added.

The decision to relocate the embassy was also taken by the administration of George Bush Jr in 2007, not during the Obama era, as asserted by Trump.

The US flag was lowered for the final time on Tuesday from the top of the former 600-room embassy in Grosvenor Square, where US General Dwight Eisenhower had his headquarters during World War Two.

The area became known as "Little America" at the time.

Trump's cancellation was met with humour on social media, with parodies of the president's tweet trending on Twitter.

A model of US President Donald Trump from the Madame Tussaud's waxwork attraction more than four miles away was placed outside the new embassy building, due to open for business on January 16, after the president's announcement.

Trump's critics believed he had pulled out of the trip over fears of mass protests over his impending state visit to the country, which is set to go ahead though no date has been confirmed by Downing Street.

London mayor Sadiq Khan tweeted Trump had "got the message" that he was not welcome, referring to the backlash over the Queen's invitation.

"Many Londoners have made it clear that Donald Trump is not welcome here while he is pursuing such a divisive agenda. It seems he's finally got that message," Khan tweeted.